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A monthly review of the latest developments in Japan’s IT, telecom, and life sciences sectors

January 2005 - Volume VIII, Issue I

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Triangle Technologies is the leading Japan Israel business development and investment advisory firm
www.triangletech.com

Dan's Desk

From Triangle's CEO

The Sales Forecast

I am happy to inform you that Danny Alexander of Boston, Massachusetts has joined Triangle Technologies, and he will be responsible for starting up Triangle's activities in Boston. Danny has been working with IT companies in Japan for the last dozen years, and before that he lived in Japan and worked for Mitsubishi Corporation and Kajima Corporation. Danny is a local Bostonian and graduated from Harvard University in 1990. (Also speaks a little Hebrew!) We believe that the greater Boston market has good potential for us and are looking forward to our getting to know people and companies there.

I also want to call your attention to a recent deal we concluded in November for Quantomix of Rehovot Israel. Quantomix www.quantomix.com has developed a neat disposable product which allows users of scanning electron microscopes (SEM's) to image wet samples. This allows users to see things that could never be seen before and its applications are for biological sciences, pharmaceuticals, and medical diagnostics. We developed a master distribution agreement with M&S Instruments of Osaka (www.technosaurus.co.jp) , and with them are developing bundling relationships with the leading SEM makers in Japan (Hitachi, JEOL, and others). Initial market reaction is excellent, although, of course, the work is still ahead of us.

I had another rather specific thought in the context of several projects we have done recently - there seems to be a built in understanding gap when managing your sales processes - partners or staff - in Japan. In Japan it is not a general practice to be intentionally overly optimistic - in fact, in forecasting, the norm is to be "aggressively conservative", if there is such a thing, and perform on target or just above. There is a strong norm of predictability.

Outside of Japan (e.g. in the US), I think most managers discount their sales department's forecasts as normally overly optimistic, yet they expect them to overshoot in order to build optimism and enthusiasm. Let's say that the Japanese sales rep thinks he can realistically achieve 40, and since the market is larger, his American counterpart thinks he can reach 80. The American and his boss will be worried if the American forecasts anything less than 100 because they both know that the achievement will be 20% lower than the forecast, and stretching is the way to motivate.

Yet the same manager's Japanese sales rep will be forecasting 35 or 40, feeling confident that they can achieve 40 or 45. The sales manager thinks, "I've got a serious problem in Japan - we are going to achieve 25 or 30, and in the US we will reach 80." See the problem? I have seen this situation create tension over and over again and it leads to micro management (the kiss of death in Japan), lack of confidence, and frequently to decisions to make changes which are not justified.

So that is my thought for the month! Good luck out there.

Dan

***TRIANGLE TECHNOLOGIES NEWS***

After a flow of deals last month, we are relaxing this month.

***ISRAEL-JAPAN NEWS***

+ISRAELI HIGH-TECH CONFERNCE IN TOKYO

The Israeli VC Association will make its annual conference in Tokyo this year. This event will be hosted by senior Japanese executives as well as by the Israeli Vice Prime Minister. It is a great platform for Israeli companies to establish and expand their business in Japan. More information is in www.oscar4b.com/japan

+FIRST HIGH LEVEL JAPANESE DELEGATION TO ISRAEL AFTER A LONG DROUGHT

A Japanese delegation comprised of several executives such as Mr. Ryoko WADA (General Manager in the Keidanren – the manufacturers association), Mr. Kazuo KANEKO (President of JEITA – Japan Electronic & Information Technology Industries Association) and others visited Israel for several days and met Israeli ministers and association. This is after several years in which there was no similar official visit.

+ANNUAL PRIZES OF EXCELLENCE FOR ISRAELI EXPORTERS TO JAPAN

On January 11th the Israel-Japan Friendship Society and Chamber of Commerce held its annual event with participation of the above mentioned delegation from Japan. Several successful Israeli companies explained how they achieved success in Japan.

Corigent – increased revenues from zero to the $15 million in one year. KDDI is a major client.

Passave – Grew last year from 20 to 75 employees, mainly because of Japan. Started to work with Mitsubishi Electric, Sumitomo Electric and other respected companies taking advantage of the “broadbandization” of Japan. One of their lessons is that they should have done several things sooner than they did – (i) working with a good consultant (ii) choosing a distributor (iii) establishing their own presence. Passave was fortunate to have a joint development project with NTT. This provided them credibility and exposure.

Comverse (SMS Division) – Replaced their competitor at Vodaphone-Japan. This competitor sold $300mm over the years to Vodaphone Japan. The average Japanese sends 17 SMS per day which us greater than all other countries by an order of magnitude.

EVS – Successfully changed their business domain. The Japanese distributor followed by adapting itself to the changing business model.

PDD Diamonds – This $150mm company established working relations with a Japanese partner over the last few years and is now enjoying the fruits. It was interesting to see that although diamonds and high-tech are different business cultures, the basic principles for success are similar.

***BUSINESS NEWS***

+TRADE SURPLUS UP 17.9% IN 2004

(Kyodo News, January 26) Japan's trade surplus in 2004 rose 17.9% from the previous year to 12,010.9 billion yen, the Finance Ministry said. Exports increased 12.2% to 61,183 billion yen, while imports expanded 10.8% to 49,172.1 billion yen.

+HOUSEHOLD SPENDING DECLINES 1.3%

(Kyodo, January 10th) Japan's household spending dipped a real 1.3% in November from a year earlier, with families spending an average of 287,400 yen, the government said. Household spending fell in November for the third straight month after posting an increase in July and August, the Ministry of Internal Affairs and Communications said in a preliminary report.

+THE YEN HIT A FIVE-YEAR HIGH AGAINST THE DOLLAR

(FT.com, January 17th) Although the dollar largely held its ground against most other major currencies, it fell to levels not seen since January 2000 in the wake of comments from a number of European and US officials calling on Asian authorities to allow a greater degree of foreign exchange flexibility. “The appreciation of the yen was matched by appreciation of most Asian currencies against the dollar as speculation that greater international pressure will result in China adopting a more flexible exchange rate regime possibly around the time of the G7 meeting. The dollar slipped as low as Y101.70 against the yen before recovering a little to Y101.82 by midday in London.

+FUJI TV EYES $720M BID FOR NIPPON BROADCAST

(FT.com, January 17) Fuji Television said Monday it would launch an offer to take control of Nippon Broadcasting System, as Japan’s leading private TV broadcaster aims to solidify its position in digital broadcasting. Fuji TV is set to raise its stake in Nippon Broadcasting, a leading radio broadcaster, to over 50 per cent from the current 12.4 per cent. The TV network is offering a 7.2 per cent premium to the radio firm’s closing price. Nippon Broadcasting, which owns 22.5 per cent of Fuji TV and is a founding member of the TV network, said Monday that it had agreed to the deal In order to maintain a strong position in the media industry. Yoshiaki Murakami, whose M&A Consulting shareholder rights activist fund owns 16.6 per cent of Nippon Broadcasting, has repeatedly called on the two companies to merge under a holding company to unlock hidden value in the radio broadcaster.

+SOFTBANK TO BUY TU-KA?

(yahoo.com, Jan 15) The media is carrying reports saying that Softbank has offered about JPY200bn ($1.96bn) to KDDI to buy out the Tu-Ka mobile phone companies. The 3 firms have an estimated 3.6m customers and would make an excellent base for Softbank to start its next generation IP over mobile services.

***TECHNOLOGY NEWS***

U.S. TO DEVELOP MISSILE INTERCEPTOR WITH JAPAN

(Kyodo News, WASHINGTON, January 10th) The U.S. Defense Department has decided to embark on the development of an interceptor missile and will seek to begin talks with Japan this year to move the joint research of the missile defense system to the development phase, Pentagon officials said Monday. The updated missile system is under a joint research program between Japan and the United States. A Pentagon official said it will probably take at least three to five years to move the advanced missile to the production and deployment stage.

+JAPAN STUDYING THREE OPTIONS FOR TSUNAMI ALERT SYSTEM

(Kyodo News, January 7th) The Japanese government is studying several options for a proposed early tsunami warning system for countries surrounding the Indian Ocean. One option being considered by Japan would lay water manometers at the bottom of the Indian Ocean to monitor changes in water pressure. Data obtained from the manometers would be sent to the proposed alert center via a satellite. The second option calls for seismometers already set up in Japan to detect earthquakes in the Indian Ocean, while the third method would require new seismometers to be set up in coastal areas of the Indian Ocean, the sources said.

+NTT DOCOMO DEVELOPS MOBILE PHONE WITH FLAT PANEL SPEAKER

(JCNN, January 7th) - NTT DoCoMo has announced a new mobile phone, the 2G mova N506iS, which features a flat panel display that also functions as a speaker. The flat panel speaker emits sound by sending vibrations throughout the entire display panel. The user can hear the person on the other end by placing an ear anywhere on the panel. In addition, the speaker's use of the entire display makes audiovisual content more vivid than conventional handsets, whose speakers are located on the side of the display. In addition, the handset offers TV hookup capability for viewing of photos and video. Other functions include an access reader that allows storage of information from business cards written in Japanese to the phone's address book, as well as dictionary searches for unfamiliar words. The N506iS incorporates flat panel speaker technology and NXT SoundVu developed by New Transducers Limited in U.K.

+BENDABLE ORGANIC DISPLAY PANEL

(Kyodo News, January 26)Kyoto University, in cooperation with Mitsubishi Chemical Corp, Pioneer Corp and Rohm Co., have jointly developed a prototype of a new type of organic electroluminescent display panel that can be bent like paper.

+PSP SHIPMENTS AT 800,000

(webpronews.com, Jan 21) Since its December 12th launch in Japan, the Sony Playstation Portable has been a huge success, with many consumers overseas begging for foreign shipments to start. In Japan, the company has shipped 800,000 units already, and announced last week that it would up the number being produced to 1m-2m per month, giving a total shipment total by March-end of around 3m units. Sony will launch the PSP in the US and Europe in March as well.

***LIFE SCIENCES AND ENVIROMENT NEWS***

+SCIENTISTS FIND GENE THAT CAUSES COMMON HUMAN ARTHRITIS

(Kyodo, January 10th) A group of Japanese scientists has found a gene suspected of causing osteoarthritis, the most common form of human arthritis, the science magazine Nature Genetics reported. The Laboratory for Bone and Joint Disease of the RIKEN SNP Research Center reported identifying asporin as a susceptibility gene for osteoarthritis in the Japanese population.

+ANTISENSE DRUG SYNTHESIS

(JCN Newswire, Jan 6th) - Nitto Denko announced development of a high-performance cross-linked polystyrene bead which can support a high-grade, high-yield synthesis of oligonucleotides, essential to DNA and RNA-based gene therapies, and provide solid support for the synthesis of antisense drugs. The development was achieved in a joint venture with Isis Pharmaceuticals, Inc., a US company that was the first in the world to succeed in bringing an antisense drug (a gene-repair therapy) to market.

+TAKARA BIO, KONICA MINOLTA TO CO-DEVELOP COMPACT CHLAMYDIA TESTING

(JCNN, January 25) - Takara Bio and Konica Minolta have jointly announced that they have agreed to co-develop an inspection system targeting chlamydia. The system combines Takara Bio's proprietary isothermal DNA amplification method ICAN (Isothermal and Chimeric primer-initiated Amplification of Nucleic acids) and Konica Minolta's Micro Total Analysis Systems muTAS and micropump technology, and accurately and simply detects the chlamydia virus. The system consists of three components: a sample preprocessing device, disposable microchip, and compact desktop analyzer. The two companies plan to develop the system within a year and commercialize it in 2008.

+ONE IN TWO SUFFER FROM HAY FEVER

(JCNN, January 20) - Kirin Brewery has announced the results of its latest attitude survey on hay fever. The company surveyed a total of 5,016 men and women nationwide via the Internet in early January. Of the respondents, 50% have had hay fever. This year alone, 45% have already experienced the symptoms. Common countermeasures are gargling, wearing masks, and taking prescribed drugs. However, 70% are not satisfied with their current countermeasures due to costs and side effects including drowsiness.